Risk Identification & Assessment - Merger/Acquisition

WHAT

The risk identification and assessment process is a critical part of effectively managing risks at a project level. Risks are identified, and then classified by risk category (financial, operational, strategic, compliance). Each risk is then assessed based on its impact and likelihood, and prioritized in order to direct management focus toward the most important (Deloitte & Touche LLP, 2012).

Identify potential risks that could impact your merger/acquisition and classify each risk into categories.

Combine to eliminate duplicates and move forward with only unique risks.

Rate each risk based on impact and likelihood.

Prioritize to ensure the right risks are managed going forward.

Develop a specific action plan to address the high-priority risks.

WHO

This model is intended for Directors of Strategy and Heads of Mergers & Acquisition departments.

WHY

Historically, half of all M&A activities have failed to create lasting shareholder value (Perry & Herd, 2004). Despite the low success rates, mergers and acquisitions are one of the key growth strategies for organizations across industries. In order to realize the expected synergies and create shareholder value, organizations must prepare themselves for the myriad of risks involved in an M&A deal - from financial risks to people risks to integration risks.

“Analysts react more favorably to an announcement of an acquisition if it is followed up with a cogent discussion about the acquirer's high priority integration initiatives, key risk factors and risk mitigation plans including the timing of each.“ (Perry & Herd, 2004)